Panama City (AFP) – U.S. President Barack Obama and Cuba's Raul Castro shook hands and sat near each other at a historic Summit of the Americas, a new milestone in efforts to shed decades of animosity.

Obama and Castro greeted each other as U.N. chief Ban Ki-moon looked on, before taking their seats with other regional leaders at a Panama City convention center.

The sight of Obama and Castro in the same room instantly became a potent symbol of their bid to renew diplomatic ties that were severed in 1961.

It was the first time that a Cuban leader attended the summit in its 21-year history.

A U.S. official characterized the Obama-Castro greeting as an "informal interaction," adding that "there was not a substantive conversation between the two leaders."

A widely anticipated broader conversation – the first between U.S. and Cuban leaders since ties broke in 1961 – is expected on Saturday.

The two leaders briefly shook hands once before, at Nelson Mandela's memorial service in Johannesburg in 2013.

"This summit in Panama has such a special dimension," Organization of American States secretary general Jose Miguel Insulza told the gathering, noting it was the first time all 35 nations were represented.

Ban added: "The presence here today of President Raul Castro of Cuba embodies a longing expressed by many in the region."

All the regional leaders then headed to a private dinner.